JSW MG, Tata Motors take small-car relief dispute under CAFE-3 to PMO

A prolonged standoff within the auto industry over proposed small-car relief under the upcoming CAFE-3 emission norms has now reached the Prime Minister’s Office (PMO), with JSW MG Motor and Tata Motors Passenger Vehicles (TMPV) escalating the issue, Business Standard has learnt.

 

In two separate letters to the PMO earlier this week, the carmakers argued that creating, and then granting relief to a new subclass of small petrol cars based on weight would undermine the national mission for electric vehicle (EV) adoption, adversely affect road safety, and be unfair to companies that have made long-term investments based on the existing definition of small cars, which is linked to vehicle length (under four metres) and engine capacity (under 1,200 cc for petrol). They also said the move would effectively benefit a single carmaker.

 

The Corporate Average Fuel Efficiency (CAFE) framework sets fleet-wide carbon dioxide emission targets for automakers, measured in grams per kilometre (g/km), with non-compliance attracting penalties from the Bureau of Energy Efficiency (BEE) under the Ministry of Power.

 

The BEE released the first draft of the CAFE-3 norms, covering the FY28-FY32 period, in June 2024. The Society of Indian Automobile Manufacturers (Siam) submitted its comments in December 2024 seeking changes. Months later, Maruti Suzuki, India’s largest carmaker and small-car seller, independently sought a weight-based exemption for small cars, a move that split the industry. In September this year, the BEE revised the draft CAFE-3 norms and, for the first time, introduced weight-based relief, proposing an additional 3g/km deduction for petrol cars weighing under 909 kg.

 

Both TMPV and JSW MG, in their letters, noted that CAFE emission limits are designed to apply across an automaker’s entire portfolio, with the objective of encouraging the adoption of sustainable technologies. They warned that providing relaxations to a specific sub-class of petrol vehicles could reduce the incentive for companies to invest in technologies such as EVs, thereby undermining India’s national mission for electric vehicle adoption. 

They said that under the prime minister’s leadership the government had set an ambitious target of 30 per cent EV penetration by 2030. EV penetration in cars has already reached 5 per cent, they noted, and India could become one of the leading makers and users of zero-emission vehicles if there is “continued” policy stability and focus.

 

TMPV, JSW MG and the PMO did not immediately respond to Business Standard’s requests for comment.

 

TMPV, in its letter, said: “The proposed weight threshold threatens to upset the level playing field by defining the threshold where a single OEM (original equipment manufacturer) has 95 per cent market share. Such a move will also be unfair for all the OEMs who have been making products as per the nearly two-decade-old categorisation of small cars, which is based solely on vehicle length (less than 4 metres) and engine size (less than 1,200cc for petrol).”

 

Under the GST regime, small petrol cars with an engine capacity of up to 1,200 cc and a length of up to four metres are taxed at 18 per cent, while all other petrol cars attract 40 per cent.

 

Raising a similar concern, JSW MG said the industry’s investments, product strategies and localisation efforts have evolved around this “consistent” definition, which has been in place for about two decades. “Introducing an additional criterion based on vehicle weight may have implications for regulatory consistency and the offering of a level playing field across manufacturers where a single OEM has 95 per cent market share,” it added.

 

On December 1, Rahul Bharti, senior executive officer (corporate affairs) at Maruti Suzuki India, said cars weighing less than 909 kg might have to be discontinued if the upcoming CAFE-3 carbon dioxide targets are “unscientific and unjust”. He said the 3 g/km benefit for small cars under the revised draft was minimal compared with incentives for electric vehicles and strong hybrids, and far lower than relaxations offered in regions such as Europe, where the allowance goes up to 18 g/km.

 

In their letters to the PMO earlier this week, JSW MG and TMPV also warned that relaxations based on vehicle weight may inadvertently incentivise manufacturers to reduce weight at the cost of essential safety features.

 

TMPV said this could undo hard-won progress in vehicle safety over recent years. “It is a fact that there are no BNCAP-rated vehicles at or below the proposed weight threshold (909 kg),” it said. BNCAP (Bharat New Car Assessment Programme) is India’s official vehicle safety rating system, which evaluates cars on parameters including adult and child occupant protection, pedestrian protection and safety assist technologies. Carmakers must voluntarily submit vehicles for assessment, after which they are awarded a star rating reflecting safety performance.

 

Weight is closely linked to safety because many features that enhance protection -- such as stronger body structures, side-impact beams, larger crumple zones and additional airbags -- add to a vehicle’s overall mass.

 

JSW MG said India’s push towards zero-emission vehicles had prompted carmakers to commit “cumulative” investments exceeding Rs 1 lakh crore across the EV value chain and the wider automotive ecosystem, including advanced cell manufacturing, battery production and charging infrastructure. These efforts are now beginning to deliver “tangible” outcomes, it said, with EV penetration in cars reaching 5 per cent.

 

For these reasons, both companies asked the PMO not to create any special category of cars based on weight for CAFE concessions, arguing that it would contradict the move towards zero-emission technologies, vehicle safety and a level playing field. They said the focus on accelerated EV adoption should continue to be reinforced in the CAFE-3 norms through a uniform and predictable framework.

 

Meanwhile, on Tuesday, the European Commission announced a new automotive package introducing a length-based exemption for small EVs under its revised carbon dioxide emissions compliance framework. Electric cars under about 4.2 metres in length manufactured in the EU will qualify for “super credits”, with each sale counting 1.3 times towards a manufacturer’s overall carbon dioxide emission targets through 2034, providing an added incentive for producers to build and sell compact EVs in Europe.